Wall Street Versus Main Street
America is a wealthy nation but is profoundly unequal. Tariffs are meant to change that. But can America tolerate the pain?
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Ask not what your country can do for you, ask what you can do for your country
-John F. Kennedy, 1961
In the summer of 2024, America set two records: the largest number of vacations to Europe ever[i], and the most dependency on food banks ever[ii]. The wealthy, flush with cash and free of COVID travel restrictions, flocked to Europe. Meanwhile, working Americans at home endured the perceived humiliation of depending on the local food bank for groceries, because bad jobs and inflation had eroded their paychecks. By traditional metrics, the American economy was healthy, as evidenced by strong GDP growth and low unemployment. But this was an economy powered by the rich, with the richest 10% doing 50% of all spending.
Meanwhile, wealth in the stock market was even more unequal. The top 10% of wealthiest Americans owned 88% of all stocks and the bottom half was in debt: student debt, credit card debt, car debt, rent, etc. Since COVID-19, the market was up over 140%, but these gains went to the wealthy.
Then on April 2, a tariff policy was introduced – reversing the trend of economic policy for the past 80 years. The market reacted poorly, falling into correction territory. The stock market is now only up 99.7% since the pandemic.
While the vocal majority has decried this policy shift as bad for the stock market, we must look beyond short-term market reactions to understand the fundamental problem these tariffs aim to address. We got here precisely because of the divergence between Wall Street and Main Street. The stock market boomed under globalization, Main Street did not.
The end goal of these tariffs, rebuilding the middle class and reindustrializing America, is something we should all agree on. This isn’t a red, or blue issue, it’s an American issue.
The growing underclass
Increasingly, there are two Americas. The wealthy America buys the latest iPhone, owns most of the stocks, and wasn’t really bothered by inflation. They didn’t like rising costs, but it didn’t change their lifestyle that much.
In contrast, working Americans, increasingly an “underclass”, live paycheck to paycheck, work multiple jobs, and 1 in 5 of them reported skipping a meal in 2024 due to rising costs[iii]. Forget about the idyllic single income economy of the past, where one parent could support the family with one job, while the other stayed at home to raise the kids. Talk to your Uber driver, usually driving isn’t their main job.
The reindustrialization of America
Over the last 40+ years, the industrial heart has been ripped out of America and all the good, middle-class jobs associated with it have been offshored. This trend has happened under Republican and Democratic Administrations alike and today, the American economy is heavily skewed to services, like fast food, not to making things.
Imposing tariffs is meant to reverse this trend, by making it more expensive to make things overseas and import them to America. The mechanics of tariffs are explained in my prior article, but there is likely to be some short-term pain, in inflation and the stock market, before the American economy can redirect trade routes that have been worn into supply chains over the past 4 decades.
On the other side of this pain is broader, more inclusive growth that benefits all people, a rebuilt middle class, and ultimately a stronger America ready to take on the challenges of the 21st century. But can America tolerate the short-term pain? For the sake of our kids and grandkids, I’m rooting for these tariffs to work.
[i] https://visaguide.world/news/these-european-countries-have-the-most-departures-from-the-us-for-2024/?utm_source=chatgpt.com
[ii] https://www.axios.com/2024/11/28/food-insecurity-banks-holiday-season?utm_source=chatgpt.com
[iii] https://www.redfin.com/news/homebuying-sacrifices-survey-2024/